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How Rent Payments Can Help Lift Credit Scores

Louis DeNicola

Louis is a personal finance writer who works with Fortune 500 financial services firms, FinTech startups, and non-profits to help promote financial literacy. He covers a variety of personal finance topics and especially likes...

Most consumer credit scores are based solely on the information in one of your credit reports. However, your credit reports might not include your rental payments. As a result, all your on-time rent payments might not be helping your credit scores. Fortunately, that may be changing.

The big three credit bureaus — Equifax, Experian and TransUnion — can now add your rental payments to your credit reports if they receive the information. And, some of the latest credit scores incorporate rent payments into their calculations.

How rent payments can help lift credit scores

The rent payments need to be reported to a credit bureau and listed on your credit report.

The credit scoring formula must consider the rental payments when determining your score and be based on the credit report that has your rental payment information.

When both of these occur, your on-time rent payments will generally either be neutral or help improve your credit scores. (If you need additional help, a credit repair service could be an option.)

Late rent payments might not be reported to the bureaus or appear on your credit reports. That’s because some of the rent reporting services may assume that you paid on time but paid your landlord directly rather than paying through the service. The credit bureau may also choose to include only on-time payments in your report.

The rent payments will be added as a new account on your reports, which could help build your credit history. For consumers who only have two accounts on their reports, adding a third account could help move them from having a “thin” file to a “thick” file, which could improve their creditworthiness.

Bear in mind, even if your landlord doesn’t report one missed payment, failure to pay your rent could eventually hurt your credit. A landlord could send your unpaid debts to collections, and the collections agency may report your account to the credit bureaus. Having an account in collections can hurt your credit score and stay on your report for up to seven years.

And though they aren’t listed on consumer credit reports, an eviction could wind up in your rental history report and make it difficult to get approved for a rental in the future.

How to get rent payments on your credit report

The first step to getting your rent payments to lift your credit score is to ask your landlord, property management company or a rent payment system to report them to the major credit bureaus.

If a large company manages your rental, there’s a chance it could already be reporting your payments to the bureaus. The Credit Builders Alliance, a national nonprofit, also works with affordable housing providers to help them report rental payments.

However, no landlord, including large companies, is required to report your payments to the credit bureaus. You could ask your property manager to sign up for a rent payment system. Or, if that doesn’t work, you could sign up with one of these companies on your own.

The cost and arrangement can vary depending on the company. For example, some require a landlord to register first, but with others, you can register on your own.

The way you pay your rent might remain the same, in which case the company will contact your landlord to verify your payment each month before reporting it to the bureaus. Or, you may have to connect your bank account, pay the service provider each month and then have the service provider send your landlord a check.

You may have to pay a one-time enrollment fee plus a monthly fee to use the rent payment system. Plus, there may be additional fees if you use a credit or debit card rather than a bank transfer to pay rent through the service.

Price shouldn’t be your only concern when comparing options. Some of the services only report to one or two of the major credit bureaus, while others report your payments to all three. Credit scores are based on information from one of your credit reports, so you’ll want your rent payments reported to all three bureaus if possible.

Additionally, look for online reviews of any service before enrolling, especially if you’re being asked to share your bank account or credit card information.

Which credit scores could rent payments affect?

The second step to rent affecting your credit score is, unfortunately, not something you can influence. Different credit scores rely on different credit scoring formulas, and not all consider your rental payments when calculating your score. However, several of the latest credit scoring models will factor in rent payments if they’re on a credit report. These include:

FICO 9

FICO XD

VantageScore 3.0

VantageScore 4.0

Each of these scoring models uses the information from one of your credit reports to generate your credit score. So, if your rent payments get reported to Experian and TransUnion, a credit score based on either your Experian or TransUnion credit reports could factor in those payments.

You can check your VantageScore 3.0 for free based on your TransUnion credit report with a My LendingTree account. However, you generally won’t know which credit score a creditor is going to use to evaluate your application. Even if you do find out, if it’s not one of the scores above, the creditor might not receive a credit score that factors in your rent payments.

Rent payments might become more important in the future

Getting your rent payments on your credit reports isn’t always easy (or free), and the payments only affect a few types of credit scores. But it could be an option for improving those credit scores. And it’s not a bad idea to get used to the idea of rent affecting your credit now. If new credit scoring models continue to factor in rental payments, and more creditors start to use the latest scoring models, rental history could soon become a regular influence on your credit score.